Starbucks China Faces 6% Sales Decline, Attracts Billion-Dollar Bids

In the ever-evolving landscape of the Chinese consumer market, a significant development has emerged as Starbucks China becomes a focal point for several prominent investment firms. High-profile capital groups, including Hillhouse Capital, have expressed keen interest in acquiring Starbucks' Chinese operations, sparking intense competition among potential buyers. The estimated value of Starbucks China's business ranges from 50 to 60 billion dollars, with Goldman Sachs serving as the exclusive financial advisor for the transaction, which is expected to conclude by 2026.

Starbucks' decision to explore selling its Chinese business comes amidst growing challenges in the local market. Since opening its first store in Beijing in 1999, Starbucks has expanded rapidly, establishing over 7,700 locations across more than 200 cities. However, the rise of domestic competitors like Luckin Coffee and Manner Coffee, along with other emerging brands, has intensified competition. Luckin Coffee, for instance, has nearly tripled Starbucks' store count and surpassed its revenue, posing a significant threat to Starbucks' market dominance. The intense rivalry has led to a 6% decline in same-store sales for Starbucks China in the first quarter of 2025, prompting the company to implement its first price reduction in 25 years.

The potential acquisition of Starbucks China by Hillhouse Capital and other investment firms highlights a broader trend in the Chinese consumer market. As the market undergoes structural changes, there has been a surge in high-profile acquisitions. Notable deals include the acquisition of RT-Mart's parent company by FountainVest Partners for approximately 13 billion Hong Kong dollars, and the purchase of Marshall by Sequoia China for 1.1 billion euros. These transactions reflect the growing appeal of the consumer sector to investors, who are actively seeking opportunities to capitalize on the market's potential despite economic fluctuations.

The potential sale of Starbucks China also draws parallels with the successful transformation of McDonald's China. In 2017, Citic Group acquired the 20-year operating rights for McDonald's China for 2.08 billion dollars, leading to a rapid localization and digitalization of the brand. McDonald's China has since expanded to over 6,000 stores and plans to reach 10,000 by 2028, demonstrating the potential for foreign brands to thrive in the Chinese market with the right local strategies. This precedent offers valuable insights for Starbucks and other international consumer brands aiming to achieve breakthrough growth in China.